Sri Lanka Expects Major Debt Restructuring Deals as IMF to Review Bailout

Lotus tower in Colombo, Sri Lanka

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Sri Lanka expects to forge major deals in its debt restructuring this month as the International Monetary Fund conducts the first review of its $3 billion loan program.

Legislators this week are likely to pass a bill amending tax laws, clearing a legal hurdle

and allowing a domestic bond swap to be completed by mid-September, central bank Governor Nandalal Weerasinghe said at an investor forum Tuesday.

Meanwhile, officials expect to reach an agreement on how to restructure its foreign debt also this month, he said.

After months of delay, Sri Lanka is stepping up efforts to fast-track its debt restructuring to help secure more funds from the IMF and set its economy back on track after it defaulted in 2022.

Sri Lanka’s dollar bondholders and lenders like China and India are closely watching

the local debt exchange as creditors seek equal treatment.

“A conclusion to the domestic debt restructuring is now likely in the next 10 to 15 days,” said Saurav Anand, South Asia economist at Standard Chartered Plc. “It’s less likely that external negotiations will be completed this month.”

Passing the IMF review, which will be held from September 14 to 27, will pave the way for the disbursement of about $330 million by November.

Sri Lanka’s dollar bonds due 2030 edged up 0.2 cents to 44.7 cents on the dollar on Tuesday, according to indicative pricing compiled by Bloomberg.

The rupee fell 1% to 321 per dollar, the biggest drop in a month.

(Source: Bloomberg)